Gladstone as Chancellor The Exchequer brought fame to Gladstone but in return Gladstone raised the office to the forefront of politics. John Maloney explains.
ested in him and his themes and in the House Gladstone was Chancellor of the Exchequer from – and again from –, first as a Peelite where his dazzling wonders were performed. and then as a Liberal. (In – and again in – Earmarking public , as Prime Minister, he would be his own Chancellor.) He first arrived at Downing Street expenditure after destroying Disraeli’s budget of on the floor If you cut government spending, you cut the budget deficit. Since the converse does not of the House of Commons, bringing down the necessarily apply, the level of public spending government, and thus earning the right and even must, logically, take precedence over the bal- the duty to bring in a budget of his own. It turned ance of the budget. Such was Gladstone’s atti- tude: except in wartime, when, typically, a de- out to be the opening act not just of the most famous gree of resignation over the level of public of all Chancellorships but of the Exchequer’s ascent spending was compensated by an extra degree to one of the three great offices of state, ranking of determination to avoid borrowing, if at all possible. only behind the premiership and the Foreign Office. Gladstone had the bad luck to begin and And Gladstone’s accession also initiated a public end his first Chancellorship in tandem with the finance where necessary taxes no longer had to be Crimean War. In his budget he ruled out (for the time being) borrowing to cover the cajoled out of a grudging Parliament muttering expenses of war, quoting Mill’s Principles to the ceaselessly about executive extravagance. For this, as effect that: ‘if capital taken in loans is abstracted we shall see, Gladstone must take much of the credit. from funds either engaged in production or destined to be employed in it, their diversion It was the style as much as the content of a from that purpose is equivalent to taking the Gladstone budget which marked him out from amount from the wages of the working the first. However austere the message, its de- classes’. livery yielded an intense and invariable pleas- Gladstone went further: unless they were ure to Gladstone and almost everyone else. So, sent the bill here and now, ‘the community’ when things went right, did the results: John would continue to extol the ‘pomp and cir- Morley, in his Life of Gladstone, attributed ‘a cumstance, glory and excitement’ of war at the carnal satisfaction’ to his chief when ‘the pub- expense of its miseries. His actual response was lic revenue advanced by leaps and bounds. De- to double income tax for a period of six months ploring expenditure with all his soul, he still only, arguing that after six months the war rubs his hands with professional pride at the would either be over or, in all probability, no elasticity of the revenue under his manage- longer supportable without borrowing. He ment.’ proved himself wrong: with higher income tax, Popular appreciation reassured Gladstone plus higher duties on spirits, sugar and malt, that his delight was a legitimate one. Morley’s he was able to run a surplus throughout the biography is full of the ‘enchaining’ and ‘de- Crimean War. But he continued to eschew the lighting’ of audiences on the subject, dull in dogma that all war spending must always be anyone else’s hands, of public finance. financed by tax increases or spending cuts else- Just as Macaulay made thousands read his- where: and when in Stafford Northcote tory who before had turned from it as dry and attributed the doctrine to him, Gladstone was repulsive, so Mr Gladstone made thousands swift with a letter of rebuke. eager to follow the public balance sheet, and More than one Chancellor has toyed with the whole nation became his audience, inter- the idea of earmarked taxation, where specific
12 journal of liberal democrat history 20: autumn 1998 tax levies finance specific types of another matter: liamentary whim. Gladstone had spending. Gladstone, by contrast, at persuaded even the radicals, in Pro- TAXPAYERS! Read Mr Cobden’s times came close to earmarked pub- fessor Parry’s words, that: ‘the fight new pamphlet, the ‘THREE PAN- lic spending, under which the bill for for economy no longer had to be ICS’, and judge for yourselves. How particular projects was to be sent to conducted against the state.’ long will you suffer yourselves to be those who had made the most noise Humbugged by PALMERSTON- on their behalf. The poor, he said, IANISM and Robbed by the ‘Serv- had demonstrated the largest appe- Putting employment ices’, and others interested in a War tite for the Crimean War. He there- Expenditure, even in times of Peace? first fore refused to let the whole bur- ... THE CHANCELLOR OF THE den fall on the better-off. However, There were two kinds of Gladstone EXCHEQUER APPEALS TO when in he came to look back budget: those with and without an YOU TO HELP HIM. You have the on the increased spending of the last extended lecture on the principles power in your own hands if you will few years, he judged it to be mainly of taxation. Some of the lecturing, only exert it. Reform the House of the fault of the more prosperous as in the budget, was little more Commons, AND DO IT THOR- classes, and so had no compunction than an engaging historical canter OUGHLY THIS TIME. in raising income tax from d to d through the precedents. Full-scale to make them pay. Gladstone’s position was not an al- sermons tended to attach themselves There was no equivalent of the together easy one. Unwilling to em- to the budgets of other Chancellors: Crimean War in Gladstone’s second brace the thoroughgoing anti-colo- notably Disraeli in and Sir Chancellorship (–), so his fo- nialism of the Manchester School, George Cornewall Lewis in . cus switched from containing the and on his own admission increas- Lewis had drawn on the authority consequences of public spending to ingly inexpert in the technical ar- of Arthur Young to argue that effi- bringing it down. (Within two days guments on which the Admiralty ciency and fairness alike demanded of resuming office in he was based its demands, he could do no a multiplicity of taxes. ‘If I were to proposing a reduction in British better than an intermittent guerrilla define a good system of taxation, it forces in the Pacific.) Gladstone’s at- campaign against the majority Lib- should be that of bearing lightly on titude to defence spending pleased eral view as led by Palmerston. But an infinite number of points, heav- Cobden and Bright, but Palmerston it was Gladstone and Palmerston’s ily on none.’ The reader, John Morley had few problems in carrying the complementarity, not any episode of commented in his Life of Gladstone, bulk of the Liberal Party with him. antagonism, Previous Parliaments’ grudging atti- which set the tude to almost any military spend- seal on mid- ing had left Britain with outdated Victorian public and inadequate defences – apparent finance. The enough even before the Crimean Prime Minister’s War revealed the full poverty of case for ex- equipment and organisation alike. penditure, com- Now Palmerston demanded more bined with the ships, better fortifications against Chancellor’s eye France and, in , better living for anything that conditions for soldiers and armour- could be con- plated ships – provoking another res- strued as unnec- ignation threat from Gladstone. essary spending, ’s budget statement dissected convinced Lib- the trend. First, said Gladstone, there erals and Con- was the ‘growth of real permanent servatives alike, wants of the country: wants which not just that any it is desirable to supply, and to which remaining taxes if you were to deny fitting supply, were necessary, you would be doing current public but also that mischief.’ Fears about national se- governments curity had contributed their share, must be allowed as had the desire to keep up with to plan the fiscal other countries’ military expendi- future reason- ture. Palmerston could hardly have ably uninter- objected to any of this: the current rupted by the placard seen around Manchester was accidents of Par- journal of liberal democrat history 20: autumn 1998 13 would have no difficulty in believ- bread, but rather had ‘created a regu- Had income tax at its rate of – ing how speedily ‘this terrible her- lar and steady trade which may be been in place throughout the Na- esy’ would have ‘kindled volcanic stated at £l,, a year.’ De- poleonic Wars, he continued, the flame in Mr Gladstone’s breast’. mand for labour had thus risen ‘and conflict would have left no burden Gladstone’s first reaction was to it is the price their labour thus of debt. But this gave rise to parallel note in his diary, contra Lewis, the brings, not the price of cheapened arguments for retaining income tax necessity of simplifying the fiscal sys- commodities, that forms the main at other times, as Peel had recognised tem ‘by concentrating its pressure on benefit they receive.’ when, in , he had ‘called forth a few well-chosen articles of ex- Inevitably the process of scrapping from repose this giant, who had once tended consumption.’ To charges tariffs and duties on this – or any shielded us in war, to come and as- that his own measures had lacked the other – basis brought protests about sist out industrious toils in peace.’ finesse of a Cornewall Lewis, instead ‘class legislation’ from those consum- The trouble began when a country now benefiting one class, now pe- ers who thought they were too near dependent on indirect taxes for its nalising another, with large changes the back of the queue and (in the main revenue then added income tax in simple taxes, Gladstone replied case of tariffs) producers who to pay for supposedly temporary that the benefits of lower taxes and thought they were too near the front. emergencies. In ’s budget speech tariffs extended, not just to the con- When the charge arose from he assured the House that: sumers of the goods concerned, but Gladstone’s refusal in to abol- ‘I should very much like to be the to almost everyone. In particular, the ish the Malt Tax, he replied that he man who could abolish the income working class ought to realise that was well aware he had done noth- tax ... I think it would be a most en- more employment should take prec- ing for the maltsters. That had been viable lot for any Chancellor of the edence over cheaper necessities. One his aim: indeed it had been his aim, Exchequer – I certainly do not en- man’s tax cut was another man’s job and his achievement, to do nothing tertain any hope that it will be mine opportunity. In his own budget for any class. Class legislation was not – but I think that some better Chan- speech of he went back to just ‘a betrayal of our duty to the cellor of the Exchequer in some for the beginnings of fiscal enlight- nation’, it was not even an effective happier time may achieve that great enment. In that year Sydney Smith way of helping the intended benefi- consummation; and that some future had written of: ciaries, who would gain much more poet may be able to sing of him, as from ‘wise legislation impartially ap- ‘taxes upon every article which en- Mr Tennyson has sung of Godiva, plied and spread over the whole ters into the mouth, or covers the although I do not suppose the means community.’ back, or is placed under the foot ... employed will be the same – But there was one tax whose taxes on everything on the earth and “He took away the tax, strengths and weaknesses, benefici- the waters under the earth – on eve- And built himself an everlasting aries and victims, pitfalls and hidden rything that comes from abroad or is name”’ charms Gladstone enjoyed dissecting grown at home – taxes on the raw above all. This was income tax. His For the last few months of his first material – taxes on every fresh value first and longest budget speech, the Premiership (–) Gladstone that is added to it by the industry of ½ hour marathon of , gave al- was also Chancellor. He used this man – taxes on the sauce which pam- most half its length to a history and brief opportunity to propose, for the pers man’s appetite, and the drug that economic analysis of income tax in first and last time in his career, the restores him to health – on the er- Britain. Income tax was disliked for abolition of income tax. The pro- mine which decorates the judge and its links with the dictatorial powers posal became to all intents and pur- the rope that hangs the criminal – on of a state at war; its ‘inquisitorial’ poses an official Liberal promise in the poor man’s salt and the rich man’s method of assessment and collection; the general election campaign of spice – on the brass nails of the cof- and for encouraging evasion and dis- – something inconceivable un- fin, and the ribands of the bride.’ honesty. But now Gladstone was able der the loose, decentralised and am- Thanks to fiscal simplification, said to find as much praise as blame for biguous political arrangements of Gladstone, the sauces, the drugs, the the tax. It was, he said, essential to earlier ages. He was saved from hav- ermine, the ropes, the coffin nails and have it on hand in wartime: ing to implement it by losing the the ribbons were all free. Even bet- election. ‘Times when the hand of violence ter, they had been freed in roughly is let loose, and when whole plains the right order. Gladstone, then as are besmeared with carnage, are the at other times, gave priority to cut- Paying addresses to times when it is desirable that you ting duties not on the working man’s should have the power of resort to both necessities, but on those goods which this mighty engine, to make it again gave him the most employment. Given the didactic and analytical available for the defence and the sal- Take the Corn Laws: repeal had not style of the typical Gladstone speech, vation of the country’. provided cheaper or much cheaper it is rather surprising that he never
14 journal of liberal democrat history 20: autumn 1998 gave an extended lecture on the courtly compliments by a long cata- this view. In ’s budget speech he merits of direct and indirect taxation. logue of her vices, making her in- warned that any future tax cuts Instead, in , he congratulated deed sound remarkably like the sort would not expand the revenue base himself on not having done so. In of person he rescued at night. He in the agreeable fashion to which the place of such inappropriate abstrac- hoped that ‘the memorable history’ House had become used: the taxes tions, Gladstone confided in the of the indirect tax cuts of the last cut so far, very naturally, were the House that: twenty years would never be forgot- worst, most burdensome ones – the ten. Removing the worst tax and taxes most deadly to prosperity. He ‘I can never think of direct or indi- tariff burdens had produced such drove the point home with the malt rect taxation except as I should think ‘elasticity of the revenue’ that the tax. Halve this tax, he warned, and of two attractive sisters, who have Treasury had ended up well in you would wait in vain for a hun- been introduced into the gay world pocket. Thus, in presenting the dred years or more for the revenue of London ... differing only as sis- Anglo-French commercial treaty to to be made up again to its old level. ters may differ, as where one is of Parliament in , Gladstone drew lighter and another of darker com- powerful comparisons between the plexion, or where there is some golden age of tariff repeal (–) A unifying figure agreeable variety of manner, the one and what had gone before and after being more free and open, and the Gladstone’s public finance fits into it. Between and duties had other somewhat more shy, retiring the rest of his economics without a been remitted only to the extent of and insinuating. I cannot conceive single rough edge. Free trade, peace, £l, per year; since there any reason why there should be un- retrenchment and a balanced budget had been no net reduction of du- friendly rivalry between the admir- formed a sturdy and – as long as ties. In each of these periods, cus- ers of these two damsels; and ... I Gladstone himself remained their toms and excise revenue had grown have always thought it not only al- champion – well-nigh impregnable by around £l, per annum. lowable, but even an act of duty, to quadrilateral on which the rest of Compare the great years from pay my addresses to them both’. mid-Victorian Liberal politics was to , when the average annual net built. Free trade served the cause of Unfortunately for the indirect sister, remission of duty had exceeded £l peace, which permitted low military Gladstone had preceded these million. Despite this, or rather be- expenditure. So far as this assisted the cause of it, balance of the budget, it provided a revenue (up windbreak behind which Gladstone by £, could dismantle another batch of a year) had protective duties. Since this, grown faster Gladstone claimed with good statis- than before tical reason, typically paid for itself or since. in a few years by its widening of the Up to revenue base, the process was self- or sustaining. thereabouts, Gladstone has had, and deserved, Gladstone a consistently good press for his own makes it consistency as a Chancellor. The sound as if charge against him has rather been indirect taxes that ‘Gladstonian finance’ was a mean are so far and unimaginative doctrine which down the not only dominated Treasury think- sunless side ing for ninety years too long but was of the Laffer also a regrettable contrast with eve- curve that he rything else Gladstone stood for. can reduce Roy Jenkins identifies J. L. Hammond them and with the view that the Treasury cor- pocket the rupted Gladstone rather than the (eventual) other way round, that: extra revenue almost in- ‘the Treasury spirit was Gladstone’s definitely. He poison. Set him free from it and he was later to became an imaginative statesman, make it clear upholding the Concert of Europe that he had and international arbitration, sensi- never taken tive to the agrarian as well as the journal of liberal democrat history 20: autumn 1998 15 political wrongs of Ireland, even ca- Irish home rule, was in economic pable of a measure of constructive matters a unifying figure in the party In This Month... reform at home. Imprison him in its he led. Indeed in the light of recent toils, and he became a penny-pinch- revisionist histories which raise ‘the 3 September 1841 ing miser, elevating the reduction or Gladstone effect’ to new heights of Gladstone accepted office in Peel’s abolition of particular taxes to the impulsive disruptiveness, Gladstone’s government. Reluctantly, as one status of an ultimate achievement, soothing influence on economic ‘having no general knowledge of trade and willing to trample on all sorts questions stands out all the more whatever’, he became Vice-President of of other desiderata on the way’. sharply. To present himself as the the Board of Trade. In 1843, he was guardian of state against extravagant promoted to President of the Board of If this is just a complaint that use of the people’s money was a life- Trade, with a seat in the Cabinet. Gladstone was never visited by the long preoccupation, whatever else bright idea of becoming a mid-nine- changed in his outlook: it was also 18 September 1842 teenth-century proto-Keynesian, the solvent that did most to hold the Gladstone lost the top joint of a finger then it is a supreme irrelevance. Even diverse Liberal coalition of interests of his left hand in a shooting accident. if we remember that Hammond was together. By the time its magic Thereafter he generally wore a finger writing in the s, and insert that ceased to work, the party had already stall or a glove to cover the damage. decade’s wildly optimistic estimates split over Irish home rule, ushering of the value of the multiplier (, in a period of years in which 6 September 1876 and even ), the public sector was The publication of Gladstone’s The the Tories would be out of office for far too small for fiscal policy to have Bulgarian Horrors and the Question of only thirty-two. a significant influence on aggregate the East. 200,000 copies were sold in demand. This paper was delivered originally at a the first month. Turkish atrocities The wisdom of the classical po- Liberal Democrat History Group meet- against rebellious Christian subjects in litical economists was less prominent ing in the National Liberal Club in July. Bosnia and Herzegovina were at first in Gladstone’s speeches than in those played down by Disraeli’s of almost any other major politician John Maloney is a lecturer in economics Government, anxious to preserve the of his time. There was a particularly at Exeter University, and the author of Turkish empire as a bulwark against stark contrast with the school of The Professionalisation of Econom- Russian expansion. thought, preeminently represented ics: Alfred Marshall and the Domi- Gladstone’s moral indignation brought by Robert Lowe and the Duke of nance of Orthodoxy (Transaction him out of retirement, helping to Argyll, which did battle against the Books, ) and Debt and Deficits revitalise the Liberal grass roots, and twin-headed monster of state activ- (Edward Elgar, ). led eventually to the Midlothian ism and historical or geographical campaign of 1879. This laid the relativism. Lowe, as Gladstone’s Notes foundations for victory in the 1880 Chancellor, fought a rearguard ac- Quoted in F. W. Hirst, Gladstone as Fin- general election which swept away the tion against the Irish Land Act of ancier and Economist (), p. . cynical Tory government and made , which compensated Irish ten- John Morley, Life of Gladstone ( ), ii, Gladstone prime minister for the p. and i, p. . second time. ants for improvements they carried Ibid., i, p. . out on their land, and for any evic- Hansard, , col. ( March ). tion not caused by default on the E. J. Feuchtwanger, Gladstone (), p. 8 September 1893 rent. To Lowe, governing Britain and . The second Home Rule Bill, designed Ireland on opposing economic prin- Roy Jenkins, Gladstone ( ). p. . to devolve Irish government to a Hansard , col. ( April ). parliament in Dublin, passed the ciples was little more than a confes- Morley ( ), i, pp. – . Commons after 82 sittings on 1 sion of economic ignorance. Argyll Jonathan Parry, The Rise and Fall of Lib- September. The House of Lords in turn was to resign from the Cabi- eral Government in Victorian Britain (), rejected the Bill on 8 September after net in over another Irish land pp. –. one short debate with a vote of 419 to act, which among other things set Morley ( ), i, p. . H. C. G. Matthew (ed.), Gladstone Dia- 41. With it, Gladstone’s last up judicial machinery to fix ‘fair ries (), vol. ,p. ( February government lost its raison d’être. rents’. ). But Lowe and Argyll were in- Hansard , cols. – ( April ). 24 September 1896 A. T. Bassett (ed.), Gladstone’s Speeches creasingly isolated within a Liberal Gladstone made his last public speech, Party which had never much cared (), p. . Hansard , col. ( April ). in his home town of Liverpool, for doctrinaire political economy. Hansard , col. ( April ). protesting against the massacre of And Gladstone himself, in sharp Hansard , col. ( April ). Armenians in Turkey. contrast to many of his initiatives on Hansard, , col. ( April ). foreign policy, defence and above all Jenkins (), p. .
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